India has been hoping to lure Apple to shift its operations from China in the wake of the Covid-19 crisis but US President Donald Trump has warned that the tech giant could face a tax penalty if it doesn’t move back its manufacturing home to the United States.
Speaking to Fox Business News, Trump was asked about a report which said Apple was looking at moving one-fifth of its production capacity to India from China. Trump replied, “We’re not allowing this anymore.” The US president went on to say in the interview that, “These... (US) companies have to get on the ball…”
Fox was asking Trump in the interview about an Economic Times article quoting an unnamed Indian government official as saying the iPhone maker was considering making up to $40 billion worth of smartphones over the next five years through manufacturers Wistron and Foxconn.
Apple, which sells only a fraction of its output in India, is looking at the country “as a base to manufacture and export, essentially diversifying its production out of China,” the official said, according to ET. Apple sells phones worth $1.5 billion in India, of which $500 million is made locally. By contrast, Apple in 2018-2019 manufactured $220 billion worth of goods in China, with $185 billion of that sold abroad, ET said.
Another source, however, told The Telegraph Online that the reported $40 billion figure by the business daily was far too high and that Apple had been looking at shifting $7 billion to $9 billion worth of business to India over the next six-to-seven years but that discussions with the government had been at “a very preliminary stage”.
On Tuesday, Prime Minister Narendra Modi, in announcing a Rs 20 trillion package to revive the coronavirus-hit economy, said the government planned land and labour reforms to make India a key player in global supply chains, some of which he said could move away from China in the wake of the novel coronavirus outbreak.
Trump, who has been threatening new retaliatory tariffs on Beijing over the coronavirus pandemic, told Fox that, “You look at where they're (Apple) going--...They're going to India and they're going to Ireland and they're going all over the place.”
The president said that, “One incentive (to get them to stop manufacturing abroad), frankly, is to charge tax for them when they make products outside.”
Modi is reported to have met with senior executives of Apple, Samsung and domestic phone manufacturer Lava last December to pitch the idea of shifting some of companies’ manufacturing operations to India. In March, the government announced three schemes offering incentives totalling Rs 48,000 crore to boost mobile phone manufacturing in the country.
Talk of some tech companies shifting production to India from China gained ground after supply routes of a number of firms operating in the country were disrupted when Covid-19 erupted in Wuhan. The outbreak forced the government to isolate the region and brought much of the Chinese economy to a halt.
On Friday, contract electronics manufacturer Foxconn, one of whose major clients is Apple, reported a nearly 90 per cent drop in first-quarter profit as Covid-19 pandemic disrupted production and hit demand from Apple and other key customers. But the Taiwanese firm, which is also present in India making the iPhone 7 and iPhone XR, said the worst of the virus outbreak was over for the company in China.
“We have a supply chain where they're made in all different parts of the world and one little piece of the world goes bad and the whole thing is messed up,” Trump told Fox. “I said we shouldn't have supply chains. We should have them all in the United States. We have the companies to do it. And if we don't, we can do that,' he added.
Japan recently announced $2.2 billion worth of financial incentives for Japanese businesses to shift their manufacturing back home from China.
In the same interview with the Fox Business Network broadcast Thursday, Trump signalled a deepening of his feud with China over the Covid-19 pandemic. He said he had no interest in speaking to Chinese President Xi Jinping right now and went as far as saying “we could cut off the whole relationship” with China.
“They should have never let this happen,” Trump said. “So I make a great trade deal (with China in January) and now I say this doesn’t feel the same to me. The ink was barely dry and the plague came over. And it doesn’t feel the same to me.”